An access bond is a wonderful way to manage your bond repayments, while still keeping additional funds available if you need them. Here’s how it works.
Article summary
- Paying extra into your bond each month saves you in interest over the long-term. An access bond allows you to do this, while still having the option to withdraw that money if you need it.
- The access bond only allows you to withdraw from the additional money you paid into the bond, not from the standard monthly repayments.
- You can apply to have a normal bond converted into an access bond at any stage during the term of your home loan.
Aside from being one of the most valuable investments you’ll ever make, a home loan can also provide an effective method for managing your funds. In fact, with the help of an access bond, your home loan can function effectively as a savings account at the same time, with all the benefits that go with that.
What is an access bond
An access bond is a type of home loan that allows borrowers who have paid extra money into their bond to withdraw the extra money should they need it.
This means that homeowners can benefit from paying interest on a smaller capital amount while the surplus funds are in the bond, but can access the money if they need it.
Extra repayments save you money in the long-term
Why would you want to pay more than the monthly repayment amount? Because it can save you significant costs in the long-term by reducing the interest you will have to pay.
Use our Extra Bond Payment Calculator to determine how much you can save with extra repayments.
Access bonds provide you with this benefit while also giving you the option to get back those funds if you really need them.
How much can you withdraw from the access bond?
Bear in mind that only the extra amount you’ve paid into your bond can be accessed, not the monthly repayments themselves.
In other words, if your monthly bond repayment amount is R8 000, and you pay R8 500 over the course of 10 months, you can withdraw R5 000 from the access bond (500 x 10).
If you wish to increase your access bond facility, the bank will be required to do a full risk assessment as required by law to ensure that you are not over-indebted.
Effective ways to use your access account
- Deposit surplus money into your home loan account as you are, in effect, saving at the rate of interest of the loan without paying tax on the interest saved, which is almost certainly more than you’d be guaranteed anywhere else.
- Deposit your salary into your bond account and transfer sufficient funds into your current account to cover all your deductions like debit orders and your household expenses. Any surplus funds remaining from your salary will reduce the interest charges on your bond.
How do I get an access bond?
All banks offer access bonds. You can either have the facility incorporated into your home loan when your home loan finance application is approved, or you can make application for this facility after your bond has been registered.
You can also apply to have a normal bond converted into an access bond at any stage during the term of your home loan, provided that your home loan has been well conducted and you are not under debt review.
In addition to extra repayments, you can save money on your home loan by employing a home loan comparison service, such as ooba Home Loans. We submit your home loan application to multiple banks, allowing you to compare deals and choose the one with the best interest rates.
We also offer a range of tools that can make the home buying process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
FAQs
How to get the most value from your savings bonds
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
May 7, 2024
You should contact your bank directly for more information. For redemption or other information about U.S. savings bonds, visit the U.S. Treasury Department's web page, www.treasurydirect.gov, or contact their office directly by calling (844) 284-2676 (toll-free).
Can I buy $10,000 worth of I bonds every year? ›
Yes, you can purchase up to $10,000 in electronic I bonds each calendar year. You can also buy an additional $5,000 in paper I bonds using your federal tax return.
How much is a $50 savings bond worth? ›
| Total Price | Total Value | Total Interest |
|---|
| $50.00 | $69.94 | $19.94 |
EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.
Are bonds or CDs better? ›
For most individual investors, CDs can play a useful role as a very low-risk part of a fixed-income portfolio or a place to park cash while earning a bit of interest. Bonds are more complex but can offer higher yields for those willing to take on a bit more risk.
What are the disadvantages of an access bond? ›
The access bond only allows you to withdraw from the additional money you paid into the bond, not from the standard monthly repayments. You can apply to have a normal bond converted into an access bond at any stage during the term of your home loan.
Do any banks still cash savings bonds? ›
Where do I cash in a savings bond? You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.
Do you pay taxes on I bonds? ›
Interest earned on I bonds is exempt from state and local tax but subject to federal tax. The interest is taxed in the year the bond is redeemed or reaches maturity, whichever comes first.
Which is better, bonds or treasury bills? ›
Treasury bonds—also called T-bonds—are long-term debt obligations that mature in terms of 20 or 30 years. They're essentially the opposite of T-bills as they're the longest-term and typically the highest-yielding among T-bills, T-bonds, and Treasury notes.
Cons of Buying I Bonds
Potential disadvantages include: Maximum investment each year is $10,000. Yield is taxed as ordinary income. Must open a TreasuryDirect account to buy and sell.
Is there anything better than I bonds? ›
Note that I bonds must be held for at least 12 months before they can be sold. If you hold them for less than five years, you will forfeit three months of interest. You can buy more in TIPS, and their liquidity is an attractive option for some investors. Plus, TIPS pay a fixed interest rate semiannually.
Are bonds taxed when cashed in? ›
The interest income of the savings bond will be taxed to the bond's owner—i.e., the recipient of the gift—when the bond matures and is redeemed for cash (or the owner will be taxed each year if they elect to report the interest income annually).
How long does it take for a $100 savings bond to mature? ›
They're available to be cashed in after a single year, though there's a penalty for cashing them in within the first five years. Otherwise, you can keep savings bonds until they fully mature, which is generally 30 years.
When should you cash in a savings bond? ›
You can get your cash for an EE or I savings bond any time after you have owned it for 1 year. However, the longer you hold the bond, the more it earns for you (for up to 30 years for an EE or I bond). Also, if you cash in the bond in less than 5 years, you lose the last 3 months of interest.
What is the final maturity of a $100 savings bond? ›
U.S. Savings Bonds mature after 20 or 30 years, depending on the type of bond: Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity. Series I bonds are sold at face value and mature after 30 years.
Why is my $100 savings bond only worth 50? ›
There are two primary reasons a bond might be worth less than its listed face value. A savings bond, for example, is sold at a discount to its face value and steadily appreciates in price as the bond approaches its maturity date. Upon maturity, the bond is redeemed for the full face value.
What happens to a savings bond after 30 years? ›
If you moved your EE bond into a TreasuryDirect account, we pay you for the bond as soon as it reaches 30 years and stops earning interest. If you still have a paper EE bond, check the issue date. If that date is more than 30 years ago, it is no longer increasing in value and you may want to cash it.
Should I wait 30 years to cash in savings bonds? ›
Most savings bonds stop earning interest (or reach maturity) between 20 to 30 years. It's possible to redeem a savings bond as soon as one year after it's purchased, but it's usually wise to wait at least five years so you don't lose the last three months of interest when you cash it in.
